Time to buy bank shares?

There is one way to profit from banks’ bumper profits – buy shares in them. A couple of months ago few pundits would have been recommending investors pile into the financial sector, after all Northern Rock and Lehman Brothers had collapsed completely, RBS had to be bailed out by the Government, HBOS was forced into an humiliating merger with Lloyds TSB, who then subsequently needed Government assistance – and dividend payments were cancelled virtually across the board. Banks were at the sharp end of the financial crisis, were leading the stock market south.

But as some of the profits posted this week prove, fortunes can be made – as well as lost – quickly.No one is suggesting investors should buy bank shares indiscriminately. As the results from Northern Rock, Lloyds TSB and RBS prove it is a pretty mixed bag. And those banks in which the Government still owns a large stake – such as RBS – are unlikely to start to paying dividends any time soon.

Nic Clarke, a banking analyst at stockbrokers Charles Stanley said: “We are more positive on HSBC and Standard Chartered, which also unveiled excellent results this week.”

At the other extreme are RBS and Lloyds, which the broker rates as a “hold”. Given the problems with these banks Mr Clarke is not recommending investors buy into these banks. But he added: “If you already hold these shares there seems little point in selling now.” He points out that the share prices in both banks has risen fourfold since their low.

Graham Spooner, an investment adviser at The Share Centre said these are promising results “but it is not all good news”. He points out that profits at Barclays UK retail arm have fallen significantly, while the bank’s bad debts continue to rise. Meanwhile HSBC is also suffering from hefty losses in the US, although its Far East operations continue to perform well.

As a result he says he would only recommend Barclays shares, and then only to higher risk investors. For low-to-medium risk investors he says both Barclays and HSBC remain a “hold”.

How to profit from your bank

Banks are moving back into the black, with both Barclays and HSBC posting multi-billion pound profits this week.

In part, this return to profitability has been driven by many banks offering far less competitive deals to their customers.

Not all banks are sitting so pretty: Northern Rock and Lloyds for example are still squarely in the red. But here, too, there are fears that banks are trying to repair their balance sheets by squeezing more profit from consumers.

Borrowing rates across all banks have remained stubbornly high and most people trying to secure a mortgage, personal loan or credit card will find rates higher than a year ago, particularly if they have a less than perfect credit score.

In particular, banks stand accused of exploiting home owners looking for the security of a fixed-rate mortgage. According to Moneyfacts, the financial data provider, the profit margins on these deals now stand at a 20-year high.

It is a similar picture with credit cards. Today the average APR rate is 18.1pc – up from 17.4pc a year ago – despite the fact that interest rates have fallen from 5pc to 0.5pc over this period.

Banks are not only getting more parsimonious about what they are prepared to lend, they are also paying far stingier rates of interest on money deposited with them.

Current accounts are a prime example. Today the vast majority of current accounts (83pc) pay less than 0.1pc interest on credit balances – again according to Moneyfacts. A year ago only about half (57pc) paid such a low amount. Worse still, nearly half of accounts today (49pc) pay no interest at all on money held in a current account. This is a sharp increase from a year ago, when only 19pc of current accounts did not pay interest.

Over this period the average overdraft rates have reduced marginally. But this masks the fact that a number of better-paying accounts, including the one offered by Nationwide BS, have recently had their rates raised.

Savings accounts are also paying less. A year ago the average easy access rate was 3.73pc; today it is a meagre 0.75pc; although this is mainly due to the dramatic fall in interest rates, rather than profiteering from banks.

With the gaps between savings rates and borrowing rates widening, it is not very hard to see how banks are making money.

But savvy customers can beat the banks at their own game. Kevin Mountford of Moneysupermarket.com says: "Consumers can help themselves by ensuring they shop around for the best deals."

As he points out, while many of the products advertised by the big banks offer pretty lacklustre rates, most banks still have one or two "best buys" designed to lure new customers through the door. Often these are "loss leaders", offering short-term introductory rates on which the banks make no money.

Banks make their money from existing customers who have little enthusiasm for moving their money elsewhere.

If you want to profit from the banks, rather than let them profit from you, you need to take advantage of such offers. And once you have secured the right deal, don't be shy about switching again. Loyalty rarely pays in financial services.

Follow our guide to get the current best banking deals on the high street.

Profit from your bank: credit cards

Virgin has the best offer – lasting for 16 months, although there is a fairly typical balance transfer fee of 2.9pc.

Those who intend to use the card for spending should apply for a First Direct or Tesco card – both charge no interest on new purchases for the first year.

Watch out for cards that offer zero interest on both balance transfer and new purchases. If the balance transfer offer is longer you may not be able to clear the cost of "new purchases" until the transferred balance is cleared in full – landing you with unexpected interest charges.

A Guide to Bank Credit Card Applications

A bank credit card is an extremely incredible and convenient piece of plastic with which one can purchase goods and services. An average American now holds up to eight bank credit cards. In order to qualify for a bank credit card, the applicant must be eighteen years of age and should have a good credit history.

U.S. banks offer various types of bank credit cards. After choosing the appropriate bank credit card, the consumer needs to submit a duly completed bank credit card application. An application and processing fee must also be paid along with the application. An individual can apply for a bank credit card online or through the phone. U.S. banks usually send bank credit card applications by ordinary mail, since the consumer is required to sign the applications upon receiving them. When bank credit card applications are transmitted online, there are more chances for fraud.

Most bank credit card applications include personal information about the consumer such as name, age, date of birth, marital status, applicant's current and previous addresses (only when the current address is less than two years), e-mail address, driver's license number, and social security number. To enter the employment details of the applicant, fields such as occupation, employer, position, household income, and source of other income are available. Bank account information is also included in the bank credit card applications. Moreover, the applicant needs to specify whether he is a citizen or a permanent resident of the U.S. If necessary, the details of the co-applicant/spouse are also required to be entered in bank credit card applications.

If the applicant is a student, in addition to the basic personal information, bank credit card applications have fields for entering student status, school name, graduation year, major, and campus telephone.

Once the bank credit card applications are completed and submitted, the bank will verify the details by contacting the consumer in person or through the given telephone numbers. The bank issues bank credit cards only when the consumer proves to hold a good credit record.

Canceling a Bank Credit Card

Nowadays, the trend of making payments with bank credit cards is rapidly increasing. But having too many bank credit cards can create a negative impact on the credit score of the person. If a bank credit card is no longer in use, it is better to cancel it. When a bank credit card is lost or stolen, it is better to cancel the credit card in order to avoid fraudulent use of the card.

Before canceling a bank credit card, one should check whether any balance remains to be paid for the particular bank credit card. Notify the bank about canceling a bank credit card only after paying off the balance amount completely. Otherwise, some banks increase the interest rate if the cardholder tries to cancel while a balance still exists.

Canceling a bank credit card can be done either by sending a letter to the bank or notifying the bank of the cancellation by phone. The request letter should contain the name, address, and account number of the cardholder. Always keep a copy of this letter to avoid future problems. On accepting the request, the bank sends back a notice, either on the same day or the next day. The rewards on the credit card as well as bank machine access stops upon cancellation of a bank credit card. Moreover, the convenience checks issued by the bank are destroyed.

After canceling a bank credit card, the person must get a copy of the current credit report and make sure to verify the credit score. The cancellation of the credit card must be reported correctly in the credit report.

It is always advisable to keep the bank credit card when the person is planning to take a vehicle loan or mortgage. Canceling a large number of unused bank credit cards can also adversely affect the credit score.

Credit cards provides detailed information on Bank Credit Cards, Bank Secured Credit Cards, Bank Student Credit Cards, No Bank Account Credit Cards and more. Bank Credit Cards is affiliated with Banking services.

ATTENTION: Bank and Bank related Frauds!!

Bank and Banking Related Fraud

Cheque Fraud / Check Fraud

Check fraud accounts for yearly losses of at least $815 million, more than twelve times the $65 million taken in bank robberies annually.

Check Kiting

Cheque kiting is when in-transit or non-existent cash is recorded in more than one bank account. The crime usually occurs when a bank pays on an unfunded deposit.

For example, a bum check is deposited into an account. Before the cash is collected by the bank, a check is written against the same account and deposited into a second account, or cashed. The increased use of wire transfers allows this type of scheme to be perpetrated very quickly.

Uninsured Deposits

At least two companies solicit uninsured deposits on the Internet. Netware International advertises itself as a "Constitutional" bank and FocusInternational.com, Ltd., is a West Indies company seeking deposits for an unidentified bank.

They lure depositors by offering high rates of interest, or promising offshore secrecy. Neither company is authorized, supervised, or regulated by any U.S. State or Federal bank or financial institutions regulator. Deposits in these companies do not have the protection of the Federal Deposit Insurance Corporation or any other state or federal deposit insurance.

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Credit Card Theft and Fraud

One con, while in jail serving a state prison term for credit-card theft, actually perpetrated yet another credit card scam over a seven month period, using a technique that allowed him to hide the fact that he was calling from jail.

He would start off by calling the county-run nursing home saying he was a Bell Atlantic technician and that he needed the person to dial a special code to test the lines. When the person pressed the requested numbers, he would be connected to an outside line that he used to call businesses.

When he called the businesses, he would tell them he was a credit-card representative and that he needed customers' names and phone numbers to verify recent transactions. With that information he then called the cardholders and posed as a credit company employee, saying he needed personal information to check for fraud.

With this personal information and the credit-card numbers, he then requested and received more credit cards with which he made about $25,000 worth of purchases of such things as sports memorabilia, flowers, and gift certificates. He also bought calling cards so he could continue the scam.

Some of the items were given to other inmates in exchange for helping with the fraud while other items were shipped to friends to be held for him until he got out of jail.

Duplication of Card Information - Skimming Scams

Credit card "double scan" machines can copy info from the magnetic strip of your card and create a new duplicate card for which your account will be billed for any purchases. Try to keep your card in sight when possible to avoid this problem.

While card issuers have fraud detection software which picks up unusual spending patterns, smaller purchase "skimming" can be subtle and prolonged, compared to the flurry of spending when a card is stolen outright.

Keep a record of your account numbers, their expiration dates, and the phone number and address of each company in a secure place.

Void incorrect receipts and destroy carbons.

Save receipts to compare with billing statements.

Open bills promptly and report any questionable charges promptly and also in writing to the card issuer.

If you realize they've been lost or stolen, immediately call the issuer. Many companies have toll-free numbers and 24-hour service to deal with such emergencies.

By law, once you report the loss or theft, you have no further responsibility for unauthorized charges. In any event, your maximum liability under federal law is $50 per card. If you suspect fraud, you may be asked to sign a statement under oath that you did not make the purchases in question.

Booster Checks

A booster check is a non-sufficient fund (NSF) check used to make a payment to a credit card account. One group used "booster checks" to "bust out" legitimate credit cards. They used credit card "convenience checks" issued by the banks and credit card companies to inflate their credit card limits; or to "bust out" the credit card to double or triple the established line of credit.

Because banking laws require financial institutions to immediately post credit payments even before the check has been cleared, they would use the window of time between the posting of the credit card payment and the discovery of the bad check to go on a spending spree and purchase, among other things, large amounts of gold coins from legitimate coin vendors.

They would also go to store owners who knowingly aided the bust out scheme, who would "swipe" the credit cards through point-of-sale credit card terminals located at their businesses. While these transactions would appear to be legitimate, no merchandise would actually be exchanged.

Once a credit card company transfers funds to a store owner's bank account, a collusive merchant is able to dispense funds from the busted out credit card. The merchants in this case allegedly issued kickback checks to the card holder for the amount of the transaction, and they would then receive a kickback from the card holder which would amount to a small percentage of the transaction.

The Secret Service estimates the total loss in this one case is between $10 million and $15 million.

Falsification of Loan Applications

While scheming to defraud four banks and a credit union, one con opened checking and savings accounts using a false name and a fraudulently obtained new social security number. He then applied for seven loans for the stated purpose of financing the purchase of motor vehicles.

He also submitted false documents concerning his employment and income, including fake tax returns. By producing fictitious records including motor vehicle appraisals, insurance documents and invoices he obtained approximately $380,000 in loans for the purchase of a 1976 Rolls-Royce Silver Shadow, a 1978 Ferrari model 308 GTS convertible, a 1992 Mercedes-Benz model 300SE, a 1995 Mercedes-Benz model SL320 and a 1994 Mercedes-Benz model 500SL.

He also applied for and was issued multiple credit cards and charge cards. In just seven months he ran up charges leading to losses of at least $460,000.

For example, he used an American Express account to pay $27,000 towards the purchase of an item of jewelry, used an MasterCard to place a $5,000 down payment towards the purchase of a 1955 Mercedes-Benz 300SL Gullwing with a purchase price of $203,000 and a 1964 Ferrari 250GT Lusso convertible with a purchase price of $153,000, and then used the American Express account to pay $320,000 towards the purchase of these two antique automobiles. He also used various VISA and MasterCard accounts to obtain substantial cash advances and used the American Express account to pay $93,600 towards the purchase of a Patek Philippe Moon Phase watch with a purchase price of $95,600.

Laxity of Enforcement

One of the problems with enforcing bank fraud laws is that it is often relegated to a low priority, or ignored altogether, because the activity can span several jurisdictions, involve many unidentified subjects, is non-violent and usually there are few leads.

Normally, the typical bank robber nets $700 and is caught within 24 hours, yet the average check scam involves losses of more than $2,000, the perpetrators are seldom caught, and there are more than one hundred times as many cases as bank robberies. Out of 10,000 cases the losses exceeded $60 million dollars.

Many bank fraud suspects are able to elude arrest by furnishing false identification when cashing stolen, forged, or counterfeited checks. One effort to stop this crime is the "Check Print" program which requires non-bank customers to provide a thumb print, using a clear solution, on the negotiated check for identification purposes. With this positive identification, it has been much easier to identify, arrest, and successfully prosecute bank fraud scams.

Check Security Features

Check manufacturers help deter check fraud by making checks difficult to copy, alter, or counterfeit. Some useful security measures include:

Watermarks. Watermarks are made by applying different degrees of pressure during the paper manufacturing process. Most watermarks make subtle designs on the front and back of the checks. These marks are not easily visible and can be seen only when they are held up to light at a 45-degree angle. This offers protection from counterfeiting, because copiers and scanners generally cannot copy watermarks accurately.

Copy Void Pantograph. Pantographs are patented designs in the background pattern of checks. When photocopied, the pattern changes and the word "VOID" appears, making the copy nonnegotiable.

Chemical Voids Chemical voids involve treating check paper in a manner that is not detectable until eradicator chemicals contact the paper. When the chemicals are applied, the treatment causes the word "VOID" to appear, making the item non-negotiable.

High Resolution Microprinting. High-resolution microprinting is very small printing, typically used for the signature line of a check or around the border, in what appears to be a line or pattern to the naked eye. When magnified, the line or pattern contains a series of words that run together or become totally illegible if the check has been photocopied or desktop scanned.

Three-dimensional Reflective Holostripe. A holostripe is a metallic stripe that contains one or more holograms, similar to those on credit cards. Those items are difficult to forge, scan, or reproduce, because they are produced by a sophisticated, laser-based etching process.

Security Inks Security inks react with common eradication chemicals. These inks reduce a forger's ability to modify the printed dollar amount or alter the designated payee, because when solvents are applied, a chemical reaction with the security ink distorts the appearance of the check.

Cooperation between Check Manufacturers and Financial Institutions

Participating financial institutions can report all checking accounts "closed for cause" to a central database, called ChexSystems. This program prevents people, who have outstanding checks due to retailers, from opening new accounts.

You can use this information before opening new accounts to spot repeat offenders and you can also use MICR information from a check presented with the applicant's drivers license number to check the SCAN file for any previous fraudulent account activity.

The bankruptcy trend

The bankruptcy trend
The number of personal bankruptcy filings in the fiscal year ended Sept. 30, 2003, rose 7.8% from the same period in 2002, reaching 1,625,813, according to the American Bankruptcy Institute (ABI). Thats twice the number of people filing for personal bankruptcy protection in 1993.

The amount of debt as a percentage of personal income tends to track bankruptcy filings, the ABI said. And the amount of debt payments as percentage of income has steadily increased in the last 10 years, according to the Federal Reserve.

Entering the real world
A cap, a gown, a degree, maybe a hangover and an average of $20,000 in debt: Thats what graduating students are leaving college with.

In the 1999-2000 academic year, about 60% of students graduating with a bachelor's degree from a four-year public college took out a federal student loan at some time, with a cumulative average debt load of $16,100, according to National Center for Education Statistics. Thats up more than 36% from the average amount public university graduates borrowed just four years previously.

For students at private institutions facing larger tuition bills, the debt load tends to be even higher. In 1999-2000, about 66% of students graduating with a bachelor's degree from a private institution borrowed an average of $18,000, up more than 27% from the $14,100 they borrowed on average in 1995-96.

Credit card debt among students is also growing at a fast clip. In 2000, 78% of students had a credit history and credit cards, up from 67% a scant two years before, according federal student-loan financier Nellie Mae. The average credit card debt per student jumped to $2,748 in 2000, up more than 46% from the average of $1,879 in 1998. The percentage of students with four or more cards rose to 32% from 27%.

Is there any evidence at all that America's youth is learning some early lessons about debt? Well, it's not much to cling to, but the average number of credit cards per student fell to three in 2000 from 3.5 in 1998.

And yet, if recent history is any guide, the typical student -- rather than paying off that college debt in the working world -- is destined simply to gather more: The average U.S. household with a mortgage, two college graduates who borrowed money for school and more than one credit card, owes about $112,000. And that figure is only expected to rise.